Adobe profits soar to the clouds as subscription model takes over
Only last week I was writing about Leica’s 20-percent discount on a year-one subscription to Adobe Creative Cloud. Now comes news that Adobe’s profits have been following Creative Cloud into the ether. Annual profits are up 22 percent on the back of the new subscription model, with subscription sales soaring 44 percent and direct product sales declining by 13 percent.
It’s a sign of the times as software developers seek an alternative to the old system of selling a version, then offering free incremental upgrades until the next major upgrade became available—a point where they could reasonably ask for more money. It was all a bit hit or miss and there was a lot of wastage, not to mention the impact of those irritating individuals who never upgraded and yet expected support for a product they bought ten years ago.
The drip-drip subscription method, which is becoming more popular, seems to be good both for the developer and the customer. The user has the peace of mind of being always up to date, with no need to worry about adding plug-ins or encountering incompatibilities. He also benefits from additional bells and whistles that the developer can throw in as part of the sub. For instance, the standalone Lightroom user who changes to the CC subscription finds that he also has access to PhotoShop, a product that would have cost a premium in the past. The software house reaps the benefit of a steady income stream which funds development and, to a large extent, relieves the constant worry of maintaining backward compatibility with older versions.
We are now more inclined to value good software and no longer resent paying for it. A monthly or annual “rental” payment is the way things are going.
Yet there is one important area where matters have gone into reverse, although clearly to the benefit of the consumer. For years Microsoft charged royally for Windows upgrades with the result that takeup of a new version of the OS was pathetically slow, Millions of users elected to stay with Windows 95, Windows 98 and what have you, much to the disruption of the market. The need to build in backward compatibility was clear—not just from Microsoft’s point of view but on the part of software developers in general. Much of the frustration of Windows use stemmed from this policy.
Then, in a stunning move, Apple attacked Microsoft’s income model by simply offering OS X upgrades free. There is now no financial excuse not to upgrade (in most cases it now takes place automatically, just as with Adobe’s Creative Cloud) with the result that Apple now sees a majority of owners upgrading within the first year. In the first month alone, the latest OS X version, El Capitan, was installed on 25 percent of Macs worldwide. This brings tremendous benefits to Apple by reducing the need for constant backwards compatibility and boosts security because more and more users are adopting the latest versions. It also helps software developers who no longer need provide for much earlier versions of the OS. Winners all round.
In the early days of computing it was the hardware that ruled the roost. Software, although vital, was intangible and something that ought to be cheap, if not free. Now, software rules and the subscription method is coming to a computer near you, soon.